Alternatives In Play For Pensions
Faced with the tremendous task of earning a set percentage of returns each year, some pensions are beginning to turn to alternative investment strategies for help.
The general obligations of public pension systems can seem daunting at times and this week is no exception. Market volatility has run rampant and today, the chief investment officer of the California Public Employees Retirement System (CalPERS), one of America’s largest pension systems, said that it would have trouble earning the assumed 7.75 percent rate of return on its assets.
According to data compiled by Bloomberg, CalPERS earned 20.7 percent in the 12 months leading up to June 30. Like many other large institutional investors, that value has dropped by $20 billion to $218.6 billion amid declines in equity markets and such.
New reports from research groups estimate that most American pensions have allocated around 10 percent to alternative assets, which include hedge funds, private equity and real estate.
Traditionally, pension mandates require portfolio managers and investment officers to spread out allocations over equities, fixed-income and other asset classes. In the last three years, there has been a surge in hedge fund investments from pension funds that include the likes of the Kentucky Retirement Systems, California State Teachers Retirement System and Public School Employees’ Retirement System of Pennsylvania.
Hedge funds have embraced the response from the traditional asset management community as some look to boost inflows and stem redemptions. The struggle for returns has forced public pensions to reconsider how much they allocate to hedge funds, especially in a riskier, volatile market.
Agecroft Partners' Don Steinbrugge expects 2022 to be a transformative year.
Firm is testing a capability to retrieve more unstructured data from alternative investment documentation.
A record number of ESG shareholder proposals passed this year.
Institutions will increase allocations to funds demonstrating robustness through recent market cycles.
Credit Suisse recently announced an exit from Prime Services activities.